Brittany Schell/The OregonianDelfino Aivila,a driver for Galaxy Wine Company, loads up for a day of distributing wine around the Portland area. Galaxy is a small, "niche" wholesaler in a market that has become dominated by a handful of big distributors. Critics of Oregon's alcohol laws say they give favored treatment to distributors at the expense of winemakers and retailers.

Oregon alcohol by the numbers

Number of alcohol "control" states, including Oregon: 18

Number of states, including Oregon, with state-run liquor stores: 8

Gallons of Oregon wine sold in 2009: 3.9 million

Gallons sold in 2011: 4.9 million (25 percent growth)

Barrels of Oregon-made beer sold in 2009: 343,619

Barrels sold in 2011: 435,194 (26 percent growth)

Number of breweries in Bend, population 80,000: 12

Number of breweries in Chicago, population 2.7 million: 13

Amount Oregon beer and wine distributors contributed to Democratic legislators and candidates so far this year: $36,300 Amount they have contributed to Republicans: $105,500

Deb Hatcher, owner of A to Z and Rex Hill wineries near Newberg, remembers the early days when she would pack cases of wine into her car and haul them herself to grocery stores and other retailers.

It wasn't always pretty.

"One of the rules is, you have to collect the money when you deliver the wine," Hatcher says. "I remember getting screamed at by the wine guy" at a Lake Oswego grocer. "He said he was sick of being an ATM machine. Then he goes to the vault and hands me a wad of cash. He's screaming at me in the store like it's my fault.

"It's a state law," says Hatcher, who now works with a Portland wholesaler to move her wine around Oregon. "There's nothing we can do about it."

She's right. That's how it works in Oregon. Under laws written to break up mob control of booze after Prohibition ended, stores and restaurants must fork over money on the spot when they buy alcohol.

Distributors love the law. They buy big volumes on credit, then sell it for cash, giving them weeks of float with other people's money. It also dissuades wineries from "self-distributing," as it's called, because they don't want to be bill collectors as well as winemakers.

Cash on the barrelhead for alcohol is but one part of Oregon's labyrinth of leftover anti-corruption laws that critics say has gone well past its expiration date. The laws, they say, put an unnecessary damper on business and tilt the whole game heavily in favor of distributors.

"These are Byzantine rules that have a purpose," says Portland attorney and lobbyist John DiLorenzo, who represents Grocery Outlet, a discount chain that wants looser laws for storing and handling wine. "The purpose is to guarantee that a privileged group always makes money, just by being there. That's what this is all about."

As the middlemen of the alcoholic beverage industry, distributors have grown into a potent financial and political force nationally, spending millions of dollars on candidates and lobbyists mostly to ensure they continue to handle nearly every bottle of beer and wine sold in the country. Two years ago, a wine industry organization totaled up a year's worth of political spending by wholesalers nationally and came up with $82 million.

Pinot politics: Oregon alcohol laws under fire

Oregon keeps tight control over the sale and distribution of alcohol under a system of laws put in place shortly after Prohibition ended in the 1930s. In a three-part series, The Oregonian examines the laws and their impact.

In Oregon, the distributors' political spending became infamous when The Oregonian uncovered an all-expenses trip to Hawaii in 2006 for seven lawmakers -- paid for by members of the Oregon Beer and Wine Distributors Association. The group remains active, lobbying against tax increases on alcohol and against changes that would loosen distribution laws. So far this year, it has raised about $200,000 to spend on candidates and lobbying, state records show, putting the PAC on par with health care groups as among the biggest political donors in Oregon.

"The lobbying muscle of the wholesale tier is obscenely huge," says Tom Wark, who writes a national wine blog that focuses on political and legal issues. It's the single biggest reason, he says, that states like Oregon continue to follow the post-Prohibition model of alcohol regulation. "They are extraordinarily powerful."

Besides the cash on delivery requirement, Oregon laws offer distributors plenty of other perks that no other businesses get. Consider:

Beer distributors get exclusive territories. If you run a brewery and you don't like how your distributor is handling your product, it's almost impossible to fire them and go with another outfit unless you fork over thousands of dollars to buy yourself out.

Beer distributors can will their businesses -- along with their exclusive territories -- to their heirs, making it difficult for others to come in and compete.

Grocery chains, such as Fred Meyer, are prohibited from sending their own trucks to wineries to pick up cases to sell in their stores. They must use a distributor.

Big grocers would like to be able to warehouse wine in a central location, then ship it to their stores as they see fit. Oregon law says they can't, that distributors must handle all the wine. Even if one Safeway store, for example, decides it has too much of a particular wine and wants to move some bottles to another store, it must summon a distributor to truck it elsewhere.

"It's absurdly inefficient," Wark says. "We're not in 1933. This is the 21st century and everything has changed."

Among the biggest changes has been the reversal in the ratio between wineries and distributors. A few decades ago, the number of distributors hovered around 20,000 nationally, with fewer than 1,000 wineries. Today, the United States boasts some 7,000 wineries, while the number of distributors has dwindled to fewer than 500.

"It's been a huge consolidation," says Jeremy Benson, executive director of Free the Grapes, a group aimed at loosening laws that control wine sales. An even smaller handful of distributors controls a majority of the market, Benson says.

Finding a distributor willing to take them on "is getting very, very difficult for wineries," especially the small or midsize ones that Oregon is famous for, he says.

Two big distributors now dominate Oregon's wine industry -- Young-Columbia and Southern Wine and Spirits -- although a handful of smaller ones have hung on.

Paul Romain, lobbyist for the Oregon Beer and Wine Distributors Association, says the distributors provide a needed service to wineries, serving as salespeople as well as wholesalers.

He sees no reason to change the way Oregon regulates wine sales. Bigger wineries get their products spread far and wide. Smaller wineries have the option of distributing wine themselves if they can't find, or afford, a distributor, he says.

But it's not that easy, says Merry Fix, half of a husband-and-wife duo that has been making pinot noir, rosé and sparkling wines at RainSong Vineyard in Lane County since the mid-1980s. They'd love to see their wines distributed to Portland restaurants -- and believe Portland wine lovers are missing out -- but can't get a distributor to handle the small amounts they produce.

"It's pretty hard for the little guys to get a foot in the door with distributors," she says. "They pretty much want to deal with the big producers."

DIY approach

The Fixes tried distributing themselves but found they don't have a knack for marketing and that stores and restaurant owners "are too busy to deal with every little guy walking in their door, trying to sell them some wine."

So they got creative. They hold open houses and festivals to attract wine tourists during the year, and they sell full barrels of wine to groups of customers, who then come to the winery and bottle their own.

Deb Hatcher's A to Z winery is among the biggest in Oregon, but they went with a small distributor, Portland's Galaxy Wine, which has found a niche specializing in small and midsize wineries.

Pinot Politics: DistributionDrivers for Galaxy Wine, a Northwest Portland wholesaler, arrive before dawn at the company's warehouse to fill their trucks with the day's payload-cases and cases of wine from Oregon and around the world. Drivers will spend the day making deliveries to stores and restaurants around Portland and throughout the state. Critics of Oregon's liquor laws say they heavily favor distributors, who have grown into a potent political force in Oregon and nationally.

Located in Northwest Portland's industrial neighborhood and run by two longtime wine buffs, Matthew Elsen and Bob Liner, Galaxy offers something the big conglomerates don't -- a bit of philosophy with their distribution services.

"Every winery has its own vision of what it needs to be successful," Liner says. "Some are just driven by how many cases they sell. We could never make them happy. Other wineries are different. They want to see their wines in the best restaurants, the best shops.

Brittany Schell/The OregonianNils Schongalla, delivery and fleet manager for Galaxy Wine Company, makes sure the shelves at a Gresham Fred Meyer are stocked with brands his company represents. Later, a store employee handed over a check for more than $300 âÂÂ state law requires retailers to pay cash on delivery for alcohol.

"That's where we thrive. Our job is to make sure Paley's has the best wines," he says, dropping the name of one of Portland's tonier restaurants.

Elsen and Liner say they're comfortable with the state's alcohol laws, although they would like to be allowed to distribute liquor made by one of the state's growing number of small craft distilleries -- one potential benefit of privatizing the alcohol market. But other laws, such as the cash-on-delivery requirement, allow them to compete with the bigger distributors, they say.

Still, they get tripped up occasionally by Oregon's rules.

On a recent weekday, Galaxy driver Delfino Aivila worked nimbly to load a truck for the day's run to east Multnomah County. It was going to be a long 10-hour day and he needed an early start. The sun had barely cracked the horizon when he arrived at the Gresham Fred Meyer on Northeast Sandy Boulevard. Inside the still-dark store he quickly unloaded his boxes, placed the bottles on the shelves.

Then he waited.

For an hour and a half, he waited.

Why? The person authorized to write the check for the delivery hadn't made it to work yet.

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